A new report looking into online music consumption habits shows that since 2009 the number of people who pirate music has dropped by 25 percent in Sweden. The sharp decrease coincides with a massive interest for the music streaming service Spotify. One of the main reasons why people switch to legal services is the wider range of material they can find there.

When Spotify launched their first beta in the fall of 2008, we branded it “an alternative to music piracy.”

Having the option to stream millions of tracks supported by an occasional ad, or free of ads for a small monthly fee, Spotify appeared to be serious competitor to music piracy. Data just released by the Swedish Music industry appears to support this theory.

Through quarterly surveys researchers have polled the music consumption habits of thousands of Swedes between the age of 15 and 74, and in their most recent report they find that music piracy continues to drop.

Since 2009 the numbers of people who download music illegally has decreased by more than 25 percent, and over the last year alone it dropped by 9 percent. The data further suggests that this downward trend is caused by the availability of improved legal services such as Spotify.

When Spotify opened up to the public early 2009, it took only three months before the number of Spotify users had outgrown the number of music pirates. In the months after that the number of downloaders continued to decline while Spotify expanded its user base.

playing in Spotify..

Streaming services such as Spotify are now the most popular way to consume music. More than 40 percent of the participants in the survey now use a music streaming service, compared to less than 10 percent who say they download music legally.

About 23 percent continue to pirate music, but this number is dwindling.

“The long-term trend is a sharp increase in legal streaming while we see a reduction in illegal file sharing and downloading,” Music Sweden’s CEO Elizabet Widlund said commenting on the results.

“When 800,000 Swedes are willing to pay for streaming music, there is clearly a market for more legal players in the digital music market. We encourage diversity of music services as it will provide better conditions for both those who create music and those who listen to it,” she added.

Looking at the motivations for people to switch to legal services, participants in the survey cited “the range of music that’s released” as the primary reason (40%). Other explanations were the absolute increase in available music (30%), and the fact that legal services have become cheaper (24%) and simpler (24%).

Although the above is certainly good news for the music industry, it has to be noted that the ‘change’ to legal services is ‘fragile.’ The survey shows a slight change in the ongoing trend during the second quarter of 2011, exactly when Spotify announced that its free service would have some new limitations.

Although this change motivated some (15%) to sign up with a paid Spotify account, the majority (31%) said they would leave Spotify to turn to other streaming services, like YouTube, or file-sharing sites.

There is no doubt that, unlike music industry bosses have claimed in the past, there are indeed ways to compete with free. However, time is needed to find the right balance between giving music fans what they want, and secure a healthy revenue stream.